The delays in the issuing of the Initial Public Offer (IPO) of Botswana Telecommunications Corporation Limited (BTCL) shares to the public are justified, according to the legal advisors of the process.
Rizwan Desai, Senior partner at renowned law firm Collins and Newman, who are the legal advisors of the IPO issue, says the sale of national asset such as BTCL is of grave concern and there are many technical processes to follow.
Rizwan Desai, Senior partner at renown law firm Collins and Newman and Co. told a stakeholders workshop last week, organized by Public Enterprises Evaluation and Privatisation Agency (PEEPA), that the postponements of the issuing of the IPO was due to necessity to handle all due processes.
“One thing that has not been clear enough is that BTCL is not a small start-up; it is an arduous task to sell of a national asset and it has taken the necessary time to ensure that all the preparatory work is done,” said Desai.
Desai pointed out that the Corporation operates in a highly regulated environment and other stakeholders include international suppliers and contract holders, as well as the formal processes that need to be followed, such as the Companies Act requirements.
Though Desai was not at liberty to specify the approvals being sought from various authorities such as the Botswana Stock Exchange and the Ministry of Transport and Communications, he indicated that such approvals are currently being processed, and will the IPO to be issued by the date of 31 December 2014.
The Botswana Telecommunications Corporation Limited shares did not go on sale on November 7th as planned.
The Ministry had intended to launch the IPO on 7th November but this has since been postponed to an unspecified date but not later than 31, December, 2014. Furthermore, as an added measure, the period of offer will also be open for a period of up to 8 weeks.
The launch of the IPO had initially been slated for August 2014 but was moved to November 7. This postponement comes after the initial postponement from the August 2014 to November 7 date, that was initially set for the listing of the BTCL shares.
The decision to further postpone the IPO date to 31 December 2014 came after prospective buyers, at various awareness Pitso held across the country recently, including major centres like Francistown and Gaborone, expressed their need for more time to mobilise funds to buy into the Company.
Desai said that the question of whether or not December is an ideal time to issuing the IPO is constantly being reviewed and that due considerations will be taken.
The Corporation said in a statement, explaining the delay that: “Two key issues, however, have been raised repeatedly in these fora which we believe we need to address. Firstly, the audiences, especially amongst the individual citizens, indicated that they had limited understanding of an IPO as well as how one can participate and benefit from it. Secondly, they requested for ample time to organise funding that they would use to purchase the shares with, in essence, that the current IPO date was too close.”
Desai admitted that with all considerations, the dates that were issued as the IPO were ‘too ambitious.’
The sale of the BTCL shares has been touted as a great investment instrument open to citizens, by BTCL chief executive Paul Taylor.
The Initial Public Offering (IPO) will see Government offering 49 percent of the shares on the BSE of which five percent has been reserved for BTCL employees through an Employee Share Ownership Programme (ESOP). Government will retain the remaining 51 percent. Citizens who buys and hold shares for foreigners stand to lose their investment amount if discovered by the Corporation.
BusinessPost understands that fronting by Botswana nationals for non citizens, is a possibility, even as the shares are reserved firstly for citizen individuals, then for institutional investors, which might include non citizens.
Desai pointed out that the monitoring of citizen investment will occur through gate keeping processes at the constitution of the corporation, at the stage were transfer secretaries handle the transactions, as well as at the stage were dividends are declared. Those who front for non-citizens stand to lose their investments, Desai said.
In the financial year 2012/13, BTCL revenues surged past the billion pula mark to stand at P 1.375 billion compared to P 1.187 billion recorded in the 2011/12 financial period.
Profit before tax increased by 20 percent from P237 million recorded in 2011/12 to P284 million in 2012/13 with net profit margin growing to 21 percent from 20 percent in the previous year.
The IPO will come with a prospectus that entails the price as well as the story of the IPO journey, as well as an ‘independent review of the numbers’ by financial advisors Deloitte, a global financial services firm.
Desai also clarified the 5 percent of the shares that are reserved for employees are held in a trust, saying BTCL employees are entitled only to dividends declared and do not own these shares. The employees forfeit these dividends when they leave the company’s employ. However, employees are also entitled to buy the BSE listed shares and enjoy ownership of BTCL shares.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”